Peter Brett West London Economic Assessment 2015
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West London Economic Assessment A baseline analysis of the West London economy Peter Brett Associates LLP Introduction • PBA were commissioned in October 2015 to complete an economic assessment of West London to refresh the existing West London Vision for Growth inform strategic planning and prioritisation of interventions by the new West London Economic Prosperity Board. • The commission was approved by the West London Growth Directors’ Board and covers the economic sub–region made up of seven Boroughs. • The assessment is high level and does not cover all economic themes in Borough by Borough detail but seeks to inform an over arching sub-regional approach. • Other proposed and future studies will contain a more detailed deep dives into skills, employment and business on a Borough, Ward and super output area. • The report is structured as follows: • Introduction and context Slides 3-8 • People & Skills Slides 9-27 • Enterprise Slides 28-45 • Place & Infrastructure Slides 46-68 • Inclusive Growth Slides 69-84 • Working to Catalyse Change Slides 85-95 • Issues to address Slides 96-98 • Selected Sources & Bibliography Slides 99-100 Peter Brett Associates LLP 2 Introduction Peter Brett Associates LLP The purpose of this report • This study provides a local economic assessment for West London. The question is “what do West London’s stakeholders need to know about current and likely future conditions to secure prosperity through the West London Vision for Growth” • This study provides • A look at macro trends, applied to West London • A spatial review of economic performance across the West London area, with a view on sub-area level performance • Key findings that will help inform the West London Economic Prosperity Board in delivering future policy, and targeting available resources where they are most likely to be effective • Proposed changes to Government structures in West London makes this work particularly important. Control over some central Government spending may be devolved to sub-regions. Without robust, granular data, the sub-region will be limited in its ability to plan and commission effectively. As City Growth Commission (2014, 12) states, “aligned service budgets and an integrated reform agenda hinge on the power of timely, accurate information”. Peter Brett Associates LLP 4 Work so far: the West London Vision for Growth • The West London Vision for Growth was developed in early 2014 and launched with the approval of West London Leaders in November 2014. • The Vision outlines six key objectives: • To achieve a step change in partnership with business and industry to facilitate sustainable economic growth • To increase small business start-up and survival rates through business support hubs, higher exports and focused collaboration with higher education institutions • To remove the skills gap and support low-paid residents in work to enable them to achieve pay levels that can sustain and improve their living arrangements • To radically improve success rates for employment programmes for residents with all young people in education, employment or training • To deliver at least 74,000 homes as part of a housing programme that meets the needs of our residents and supports growth • To create and maintain thriving town centres which are hubs for work and living • The West London Alliance states that the vision provides a good high level commitment to growth, but that a specific prioritisation of how to encourage inclusive growth in West London is needed • This assessment is the first stage in this process. It will be used to refresh the vision, which can be prioritised and translated into action planning. Peter Brett Associates LLP 5 This assessment broadly follows the Government’s framework for increasing productivity, but with an additional focus on inclusive growth - so that all West London businesses and residents capture benefits • A plan to grow productivity as a driver for economic growth has been the focus for the current and past governments. • ‘Productivity is the challenge of our time. It is what makes nations stronger, and families richer.’ (Treasury 2015: Fixing the Foundations) • The Treasury work sets key reforms to achieve a ‘step change’ towards creating a competitive economy • ‘encouraging long-term investment in economic capital, incl: infrastructure, skills & knowledge’ (Treasury 2015) • ‘promoting a dynamic economy that encourages innovation & helps resources flow to their most productive use’ (Treasury 2015) • Productivity relies on increasing three key factors: • People and skills –growing human capital • Enterprise – supporting what businesses do • Investment – in infrastructure and places • Our report follows this broad structure. We add a focus on inclusive growth to ensure that growth improves everyone’s living standards. • We begin with the context of change. Peter Brett Associates LLP 6 The long term is driven by product and technological change, making future sources of success very hard to predict. Ideas of the future vary widely, so it seems centrally important to stay flexible and innovative >Stiglitz: The first great depression was caused by a shift from farming <Tetlock: Predictions, even from to factories. The same process is experts, are usually wide of the happening as jobs move from mark. Experts’ predictions perform manufacturing to services only slightly better than random guessing >Cowen: Innovation is slowing down. Economic growth will be low in future. There’s nothing much can be done <Taleb: seemingly improbable events occur far more >Perez: we are going through an frequently than ICT revolution. Revolutions cause thought crisis. We need the state to roll out ICT >Arthur: Innovation is speeding up rapidly, as ICT gets adopted. Expect massive disruption. Technological unemployment will become widespread Peter Brett Associates LLP 7 7 There are three broad risks to West London’s prosperity • Risk 1: West London becomes a victim of its own success. It fails to invest in new growth capacity, and is overwhelmed as the external costs of growth (transport congestion; air quality; reduced social infrastructure quality; housing costs) gradually outweigh the locational benefits of being in London. As the city economy loses efficiency, capital investment moves out over time, and skilled labour follows. • Risk 2: West London fails to stay flexible and innovative, and becomes over-dependent on certain products or technologies. Professor James Simmie shows how some places have become ‘locked in’ to certain economic sectors, and so fail to adapt to emergent technologies and working patterns as they change over time. Simmie suggests that an ability to innovate is central to explanations of why some areas have been able to remain successful over time, whilst some areas have failed. • Risk 3: Inequalities and social exclusion in West London rise unacceptably. Social cohesion is a partial determinant of economic growth. A level of trust in other people is essential for economic success in large, dispersed and interdependent society. • In the worst case, each of the above risks could manifest themselves simultaneously in different economic sectors and parts of West London. West London could develop an approach which is intended to manage and reduce these risks in order to secure long-term prosperity. West London will need to invest in the capacity needed to cope with rapid growth; maximise the ability of the economy to adapt in the face of what is likely to be very rapid change, and create an environment in which new land uses and economic configurations are supported; and create a level of social inclusion which gives all members of society a shared stake in prosperity and growth. Peter Brett Associates LLP 8 People and skills Peter Brett Associates LLP What this section is about, and why it is important • Skills are an important determinant of economic performance and growth. • Low skills are bad for individuals: educational attainment – in the form of qualifications and test scores – during compulsory schooling has been identified as “the most frequent and effective childhood predictor of adult outcomes”. (SEU 2004). Non-graduates, on average, earn around £200,000 less over a lifetime than non-graduates – even after taking degree costs into account. (BIS 2013). • Low skills are bad for West London as whole: There are wider network effects that mean that one person’s increase in skills increases the productive capacity of others. That means that the subject has a wider social and economic relevance, and is one of the justifications for Government intervention in the provision of skills. The skills of the workforce and technical expertise in a region are the most important drivers of knowledge-based industry business location choices. (DfT). And research has shown for example that a 1 percentage point increase in the number of people being trained adds 0.6% to productivity (Institute of Fiscal Studies, WP05/16). In OECD countries a 1% increase in the number of graduates adds 1.1% to GDP growth (BIS, Next steps for universities, business and Government, June 2012). • Demographic profiles matter to economic outcomes. Other things being equal, rising populations tend to bring rises in economic output, but the profile of the population has an important influence on income per head. This is because people’s economic behaviour and needs vary at different stages of life: while young people require investment in health and education, prime-age adults supply labour and savings, and the elderly require